After a 13% Fall Today Should You Buy This Stock?

  • Stock Market Analysis
  • Editors Pick

One stock that’s making investors nervous for the last 3 trading sessions is Vodafone Idea (NS: VODA ). It is a telecom player with a market capitalization of INR 77,157 crore and trades at a negative TTM P/E ratio of 2.57. This is because the company has been struggling for years to become net profitable and its reeling under heavy losses.

Still, the share price of Vodafone Idea has risen 133% in the last one year. However, the stock has fallen 22% this week so far, to INR 13.65. This is the steepest weekly fall (so far) in over a year. The reason for the fall is the fundraising plan by the management but what’s questionable is how much further equity delusion will take place which is primarily concerning investors.

Those finding this, an opportunity to buy the stock should note a few points here. The company hasn’t posted a single profitable year in the last many. It is consistently losing its subscriber base month over month to competitors such as Jio and Bharti Airtel (NS: BRTI ). It is crumbling under heavy debt and the management has already diluted its 33% stake in the company to the government in order to settle the AGR dues.

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Nothing good so far. Now ProTips clearly mentions that analysts do not expect the company to turn profitable this year as well which is another negative. The stock is also trading at a high revenue multiple which also needs to be considered, and it does not pay any dividends at all (obviously)

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Now some objective measures. The fair value of the stock is INR 10.5, which means the stock can further fall by 22% from the CMP of INR 13.65. But here are more interesting details. Out of all 5 financial models used to calculate the intrinsic value of this stock, even the highest value came out to be INR 13, lower than the CMP.

There are 17 analysts covering this counter and the highest target given by one of them is INR 14, barely a few paise above the CMP.

Hence, those who were aware of such facts shown in InvestingPro+ would probably have liquidated their holdings at higher levels. Always remember, whichever stock you have in your portfolio, make sure to check what is its fair value and targets given by analysts. Other important information will be pointed out by ProTips.

The zone of INR 10 - 10.5 seems to be good support and that level can become a good entry point.


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